The report, produced by The McKell Institute, analysed six NSW government transport contracts which resulted in offshore construction in places including South Korea, Spain, China, Indonesia and Germany.

It found that if wider economic benefits to the community were considered in the contract tender process, four of the six projects would have been domestically awarded, creating more than 4000 jobs.

Almost $500 million in extra payroll and income taxes would also be collected.

The McKell Institute executive director Michael Buckland said the government should do more to account for the benefits of local production.

Additionally, the report found that savings accrued from overseas production were negated by average project budget blowouts of more than 40 per cent.

"We consider wider economic benefits when making decisions about major infrastructure projects. It makes no sense to ignore them for significant procurement contracts," Mr Buckland said in a statement.

"In many cases offshoring contracts drives economic value and jobs overseas.

"Though gains from trade are real and significant, they pale in comparison to the benefits we gain domestically from using local producers."

The report recommended NSW government agencies publish wider economic benefits "as part of a holistic cost-benefit analysis" when making decisions about procurement contracts which exceed $1 billion.

The NSW government does not currently take this step.

It also encouraged the government to establish an "international sourcing comparator" to promote procurement contract transparency.

Unions NSW secretary Mark Morey called for more onshore projects.

"Not only are NSW taxpayers missing out on the economic benefits tied to local production but they are footing the bill for costly mistakes made by foreign producers," Mr Morey said in a statement.

The Australian Manufacturing Workers' Union NSW & ACT (AMWU) echoed Mr Morey's remarks, calling on the NSW government to end the offshoring of transport infrastructure projects and invest in local workers.

"We urgently need to review and revise the state government's procurement process to put these broader economic and social benefits at the heart of the procurement system," AMWU state secretary Cory Wright said.

"When we build locally, we not only get a quality product, we create secure jobs and training opportunities for the next generation of apprentices."

Federal Labor industry spokesman Ed Husic told reporters rebuilding manufacturing back home should be a priority.

"The aim of the game now is sovereign capability - making sure Australia is a country that can make things, rebuilding manufacturing," he said on Friday.

Australian Associated Press